Employees can ask their employer to pay out in cash, up to one week of their four weeks’ minimum entitlement to annual holidays per year for each entitlement year. They can do this all at once, or can make multiple requests to cash-up until the entire one week is cashed up.
An employer can’t:
- pressure an employee into cashing up holidays
- raise it in wage or salary negotiations
- make cash up a condition of employment
- put a cash up request into an employment agreement, but can include the process for making a request.
Requests to cash up annual holidays
Annual holidays can’t be cashed-up unless the employee asks in writing and has completed 12 months employment. Employees may request to cash-up less than a week at a time and can make more than one request until a maximum of one week of the employee’s minimum annual holidays is paid out in each entitlement year.
For example, an employee with an anniversary date of 1 June can ask that up to one week’s holiday that they become entitled to on 1 June be paid out. Their request can be made at any point in the entitlement year that runs from 1 June to 31 May the following year.
- must consider a cash up request within a reasonable time,
- may say no,
- must inform the employee in writing,
- doesn’t have to give a reason for their decision.
An employer can have a workplace policy that covers all or part of the workplace. This policy can state that they don’t have to consider requests for annual holidays cash up. If that is the case, then the above doesn’t apply.
Payment of cashed up annual holidays
If an employer agrees to pay out some of the employee's annual holidays, they need to pay as soon as they can, usually the next pay day (and keep a record of the date and amount paid). The payment must be at least the same amount as if the employee had taken the holidays.
If an employer agrees to pay out some of the employee's annual holidays, but the employer and employee can’t agree on the proportion or payment amount, a Labour Inspector may decide for them.
If an employer pays out a portion of the employee's annual holidays where the employee didn’t ask for the cash up or, if the employer has not been given a written request to cash up the annual holidays from the employee, the employee can both keep the cash up money and still take the portion of annual holidays cashed up as paid holidays. The employer may also face a penalty.
Taking parental leave may have an impact on the amount that an employee is paid when they take an annual holiday and how much a cashed up annual holiday is paid out at.
Parental leave provides information for employers, employees and self-employed people about parental leave and associated entitlements.
Inland Revenue (external link) has for information about the impact that cashing up annual holidays may have on superannuation payments, working for families, child support and income tax.
Cashing up additional holidays in employment agreements
If their employment agreement provides annual holidays in addition to the minimum four weeks, it may also provide for the additional holidays to be cashed up, for example, if the employment agreement provides five weeks’ annual holidays per year and two weeks could be cashed up, this would be allowed. If the employment agreement provides five weeks per year and that all five weeks could be cashed up, then this would go against the Holidays Act 2003 and the employee would not be able to cash up more than two weeks’ annual holidays even with their employer’s agreement.